The Process of Probabilistic Thinking
In “The Signal and The Noise,” data scientist Nate Silver uses the tales of a professional gambler and a poker champion to illustrate a skill deemed critical to their respective successes: the ability to simultaneously hold in mind multiple hypotheses about the possible outcomes of sporting events and poker hands and update their beliefs accordingly as new data are revealed. Silver writes, “Successful gamblers—and successful forecasters of any kind—do not think of the future in terms of no-lose bets, unimpeachable theories, and infinitely precise measurements. Successful gamblers, instead, think of the future as speckles of probability, flickering upward and downward like a stock market ticker to every new jolt of information.”
Similarly, in “Superforecasting: The Art and Science of Predicting,” Philip Tetlock writes about the strategies of an unlikely but elite group of forecasters whose accuracy greatly exceeded that of supposed experts and states, “[this book is] about how to be accurate, and the superforecasters show that probabilistic thinking is essential for that.”
This skill of probabilistic thinking is crucial in virtually any context in which we need to reason about an uncertain future. Humans are notoriously prone to cognitive biases that, once we have a pet theory in mind, lead us to discount information that conflicts with that theory and more heavily weight information that supports it (see Nobel prize winner Daniel Kahneman’s “Thinking Fast and Slow” for more on this fascinating topic).
This article describes a simple process for making and updating your forecasts in a principled, consistent manner that makes maximum use of the available evidence and helps avoid harmful cognitive biases.
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